US Dollar Chart Watch - Update

A week ago we ran this article noting that the US dollar index as hovering just above a key support area at 93-94. The dollar index had fallen down to the 94 level twice and weakly bounced up a little as you can see on this chart. We wondered if the 94 level would hold. This week we get our answer as the dollar did not hold the 94 level and closed Friday just barely above 93. This has some added significance since this was both a weekly and monthly close. 

When you look at the chart linked above virtually every indicator is suggesting that the dollar index is headed a lot lower soon. It will have to stage an immediately sharp rally off 93 or else it is probably headed into a deeper dive. On this longer term chart you can see that there is not much support until the 80-82 area. A drop down to there will be a major event and will send gold, silver and oil prices higher. About the only positive you can find on the charts is that the dollar index is showing to be oversold, but if 93 does not hold, that will likely just continue to be the case for awhile longer.

Normally I don't monitor things like this on a daily basis, but in this case the dollar index is at a very key level from a technical standpoint. It must stage a stronger rally soon or we will likely see a drop (over 10% in a short time frame) that will get investor and media attention. Because we do know that governments and central banks do intervene in markets at times, it will be interesting to see if any effort is made to rally the US dollar index right here. If there isn't, it suggests to me that a decision has been made to let the dollar go for now or that market forces pulling the dollar down are too strong for attempted intervention to matter. Just keep an eye on it over the next couple of weeks and see if it rallies or breaks down into an even sharper decline. The chart right now suggests the later is more likely.

Added update 5-2-16: Here is a decent technical analysis that points out what we are saying about the dollar being at a very important point right now on its chart and the potential impact on precious metals depending on what happens next with the dollar.